According to the regulator, A&L did not make it sufficiently clear to customers that PPI was optional, and even trained its staff to put pressure on customers who asked why PPI had been added to their loan quotation.
The bank also sought to find reasons to sell PPI without properly considering what customers needed.
A&L has accepted the fine, while group CEO David Bennett “apologised sincerely” for the bank’s shortcomings. A&L will now write a letter to all customers concerned, and is promising to reimburse anyone found to have been mis-sold a policy.
Record fine, but more action needed
The £7 million fine is by far the heaviest doled out by the FSA for PPI failings – the previous record was a £1 million penalty on HFC Bank – and is an early indication that it is making good on last week’s promise to finally get tough on the rampant PPI mis-selling that still blights the industry, three years after the regulator began its clampdown on the insurance.
“The failings at A&L are the most serious we have found… which is reflected in the record PPI fine,” says FSA enforcement director Margaret Cole. “It is very disappointing that after three years of regulation we are still finding serious problems in PPI sales.”
“This case shows that we will continue to step up the action we take when firms do not sell PPI properly. Customers should be able to rely on impartial advice based on their individual needs and demands.
“It is particularly unacceptable for a firm to train its advisers to put pressure on customers when recommending insurance cover which they have not asked for and may not need. Firms cannot rely on paperwork sent out later as an excuse for unclear or misleading statements given on the telephone.”
Small change to A&L
However, it is worth pointing out that the £7 million fine is unlikely to make a massive dent in A&L’s PPI profits.
A report written by the Competition Commission in February found that banks were pocketing around £1,200 from a policy that costs them just £20.
According to the FSA, A&L sold 210,000 PPI policies to personal loan customers between January 2005 and December 2007 at an average price of £1,265.
Assuming A&L earned similar margins on PPI as the other major banks, they would have raked in around £248 million in profits during that period – 35 times more than the fine.
So while the fine is a welcome move in the fight to stamp out mis-selling, it’s possible the regulator may need to consider even more drastic measures in the future.
A&L & Equity Release
What Is Equity Release?
Equity release is the use of financial arrangements that provide the owner of a house, or other property, with funds derived from the value of the property while enabling them to continue using it.
How Does Equity Release Work?
Equity release is aimed at homeowners aged 55 and over. It allows you to take some of the value of your home as cash.
Equity Release and A&L as a form of Investment
Private equity is flush due to pandemic savings getting channeled towards investments and because of record levels of initial public offerings in the last year that have allowed PE funds to cash out of earlier investments.